Transcript
A (0:03)
After six failed bids to acquire Warner Brothers, Paramount is taking it to court. We review the latest in the Hollywood drama that is this week's merger moment. A major new hire at Meta. While Apple and Google team up on Gemini. We break down the newest moves in big tech. And the Justice Department has launched a criminal investigation into Federal Reserve Chair Jerome Powell's leadership of renovations at the Fed's headquarters. This is an unprecedented moment. So we unpack why the market is shrugging it off. For Monday, January 12, it's Blue Markets Daily and I'm Ann Berry. More market details to come. But first, it's a historic moment for the Fed and we've seen stocks yo yoing around today and yields jumping up. But this motion wasn't entirely intuitive. So here's our take on the latest as it stands now, just for some context, text. Yesterday, Federal Reserve Chair Jay Powell released a statement saying that, quote, the Department of Justice served the Federal Reserve with grand jury subpoenas threatening a criminal indictment related to my testimony before the Senate Banking Committee last June. Now, for context, in that June testimony, Powell defended a multi year, two and a half billion dollar renovation of the Fed's headquarters in Washington, D.C. now estimates for the cost of renovating the historical buildings and had increased, leaving Powell to defend them by emphasizing that, quote, the project's purpose was to make the building safe and healthy by removing asbestos and lead contamination and replacing antiquated electrical, plumbing and H vac systems. President Trump has criticized the cost of the refurbishment, but that is not his only issue with Pal, not by a long shot. In his whole year back in the White House, the president has demanded that the Fed cut interest rates and repeatedly expressed a desire to fire Pal. Well, the Fed chair has made a concerted effort not to respond to Trump's criticisms in public, trying to keep the politics out of it, but not this time. Instead, Pal stated this weekend, quote, this new threat is not about my testimony last June or about the renovation of the Federal Reserve buildings. It is not about Congress's oversight role. The Fed, through testimony and other public disclosures, made every effort to keep Congress informed about the renovation project. Those are pretexts. The threat of, of criminal charges as a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public rather than following the preferences of the president. In other words, Jay Powell unequivocally saying he is being punished for the Fed acting independently. So what was the market's reaction and why? Well, this one turned out to be a little bit of a Head scratcher. As the day went on, at least one person's view, US equities did start down today. And it's been conventional wisdom for decades that central bank independence is a a good thing, broadly defined as the autonomy to keep monetary policy focused on price and inflation stability, often though while balancing goals, of course, of maintaining economic growth and employment. So the critical word here is autonomy to credibly remain immune from pressure to accommodate government spending that could be inflationary, for example. And just to give some context here, self described independent banks are prevalent amongst America's closest trading allies, including the Eurozone's Euro European Central bank, the United Kingdom's bank of England, as well as the central banks of Japan, Switzerland, Mexico and others. So the equity markets here in the US did open down today because they generally do not like uncertainty. And when that uncertainty then kicks in around the mandate, the independence and the leadership of the Fed, an institution that's critical for the stability of the US economy, that dip down made a ton of sense. All of that being said, the markets rebounded today as it absorbed the news a little bit further and seemed to reach two conclusions. This is one person's view interpreting what the market was thinking when it actually ended up flattish to up for today. Number one conclusion, that with Trump's prolonged eagerness to fire Jay Powell, turmoil has almost been normalized by these markets. Rate cuts also did start last year and as his term as chair expires in only four months time, the market seems to be shrugging it off and saying it can find a way to just manage through a relatively short lame duck period. And takeaway number two for me on what the markets are thinking, they seem to be feeling short termist, the market thinking that a message is being sent here by President Trump to whoever succeeds Powell to do as the President wants or else. Now, Trump has been very clear what he wants. He wants to see lower interest rates, to stimulate the housing market and to cut the cost of government borrowing, both of which the market clearly feeling, at least for now, is a trade it's willing to take. Now let's take a quick look at Treasuries. Short dated yields did drop on the promise of political pressure pushing the Fed towards earlier or deeper rate cuts for 2026. Longer dated yields though, did go up as the market seemed to price in a higher probability of future inflation. So that was the market's reaction. But what about Jay Powell's? Well, let's hear his position in his own voice. I have served at the Federal Reserve under four administrations, Republicans and Democrats alike. In every case, I have carried out my duties without political fear or favor, focused solely on our mandate of price stability and maximum employment. Public service sometimes requires standing firm in the face of threats. Cannot emphasize enough how different it is for Jay Powell to actually come out and specifically address political concerns, quote, standing firm in the face of threats. There's been a lot of conjecture about the President's ability to fire Jay Powell. He certainly expressed the desire to do it. And Jay Powell has remained silent in the face of those comments. So really breaking his silence for the first time in this instance. Powell did conclude by saying, quote, I will continue to do the job the Senate confirmed me to do with integrity and a commitment to serving the American people. Just as a fact throughout that Fed Chair J. Pal is, by the way, a trained lawyer. He got his J.D. from Georgetown University, spent two years as a law clerk on the U.S. court of Appeals for the Second Circuit, and he worked at a major corporate law firm here in New York before moving over to banking. So I'm sure he's certainly able to reach out to get some good counsel on this one. This story is going to keep unfolding. The market reaction, I suspect is going to keep moving as this story unfolds. We're going to keep watching this one very, very carefully. Coming up, what is the value of the global discovery channels, the cable channels like CNN and tbs? Well, Paramount is filing a lawsuit to find out and major moves in big tech today we we're going to break them down. But first a word from our sponsor, Public John Are there any relics you're using in your daily life? New year. But here we are talking about relics.